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                Your CPA firm has conducted the Year 8 audit of Big Air Company, an issuer whose bank requires an integrated audit.&nbsp; Big Air is an aircraft manufacturer that has engaged your firm as its independent auditor since the company's inception.&nbsp;<br>
                &nbsp;<br>
                The materiality for the Year 8 audit was set at $3 million.&nbsp;<br>
                <br>
                At the conclusion of the Year 8 audit, you, as the audit senior, are responsible for drafting the audit report to reflect the results of the audit.&nbsp; Your audit staff has pulled a standard Combined Audit Report template and pre-populated the template with Big Air's basic information.&nbsp; You will need to review this template along with other relevant audit work papers and client communications in the Exhibits tab to complete the combined audit report prior to submitting the report for your manager's review.&nbsp;<br>
                <br>
                To revise the combined audit report, click on each segment of underlined text below and select the needed correction, if any, from the list provided.&nbsp; If the underlined text is already correct and does not need to be updated, select [Original text] from the list.&nbsp; If removal of the underlined text is the best revision, select [Delete text] from the list.&nbsp;<br>
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                <span class="parent mbg {if condition='isset($log.1)'}xbg{/if}">{if condition='isset($log.1) && $log.1.topic_v eq 2'}<s>{/if}Independent Auditor's Report{if condition='isset($log.1) && $log.1.topic_v eq 2'}</s>{/if}</span>
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                The Board of Directors and Stockholders<br>
                Big Air Company:<br>
                &nbsp;<br>
                We have audited the accompanying consolidated statements of financial position of Big Air Company as of December 31, Year 8 and Year 7, and the related consolidated statements of operations, comprehensive income, cash flows, and shareholder equity for each of the years in the three-year period ended December 31, Year 8. &nbsp;We also have audited Big Air Company's internal control over financial reporting as of December 31, Year 8, based on criteria established in <em>Internal Control—Integrated Framework (2013)</em> issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).&nbsp; Big Air Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. &nbsp;Our responsibility is to express an opinion on these financial statements and an opinion on the company's internal control over financial reporting based on our audits.<br>
                <br>
                <span class="parent mbg {if condition='isset($log.2)'}xbg{/if}">{if condition='isset($log.2) && $log.2.topic_v eq 2'}<s>{/if}We conducted our audit of the financial statements in accordance with auditing standards generally accepted in the United States of America and our audit of internal control over financial reporting in accordance with attestation standards established by the American Institute of Certified Public Accountants.{if condition='isset($log.2) && $log.2.topic_v eq 2'}</s>{/if}</span>
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                                <input type="radio" name="topic_t[2]" value="1" {if condition='isset($log.2) && $log.2.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'> We conducted our audit of the financial statements in accordance with auditing standards generally accepted in the United States of America and our audit of internal control over financial reporting in accordance with attestation standards established by the American Institute of Certified Public Accountants.</em>" ><br/>
                                <input type="radio" name="topic_t[2]" value="2" {if condition='isset($log.2) && $log.2.topic_v eq 2'}checked{/if} title="[Delete Text]"><br/>
                                <input type="radio" name="topic_t[2]" value="3" {if condition='isset($log.2) && $log.2.topic_v eq 3'}checked{/if} title="<em class='span'>We conducted our audits in accordance with the standards of the American Institute of Certified Public Accountants.</em>" ><br/>
                                <input type="radio" name="topic_t[2]" value="4" {if condition='isset($log.2) && $log.2.topic_v eq 4'}checked{/if} title="<em class='span'>We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).</em>"><br/>
                                <input type="radio" name="topic_t[2]" value="5" {if condition='isset($log.2) && $log.2.topic_v eq 5'}checked{/if} title="<em class='span'>We conducted our audit of the financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and our audit of internal control over financial reporting in accordance with attestation standards established by the American Institute of Certified Public Accountants.</em>" ><br/>
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                </form> &nbsp;Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. &nbsp;Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. &nbsp;Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. &nbsp;Our audits also included performing such other procedures as we considered necessary in the circumstances. &nbsp;We believe that our audits provide a reasonable basis for our opinions.<br>
                <br>
                <span class="parent mbg {if condition='isset($log.3)'}xbg{/if}">{if condition='isset($log.3) && $log.3.topic_v eq 2'}<s>{/if}A company's internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliable financial statements in accordance with accounting principles generally accepted in the United States of America.{if condition='isset($log.3) && $log.3.topic_v eq 2'}</s>{/if}</span>
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                                <input type="radio" name="topic_t[3]" value="2" {if condition='isset($log.3) && $log.3.topic_v eq 2'}checked{/if} title="[Delete Text]"><br/>
                                <input type="radio" name="topic_t[3]" value="3" {if condition='isset($log.3) && $log.3.topic_v eq 3'}checked{/if} title="<em class='span'>A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.</em>" ><br/>
                                <input type="radio" name="topic_t[3]" value="4" {if condition='isset($log.3) && $log.3.topic_v eq 4'}checked{/if} title="<em class='span'>A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the standards of the Public Company Accounting Oversight Board (United States).</em>"><br/>
                                <input type="radio" name="topic_t[3]" value="5" {if condition='isset($log.3) && $log.3.topic_v eq 5'}checked{/if} title="<em class='span'>A company's internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliable financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).</em>" ><br/>
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                </form>&nbsp;A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.<br>
                &nbsp;<br>
                Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. &nbsp;Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.<br>
                <br>
                <span class="parent mbg {if condition='isset($log.4)'}xbg{/if}">{if condition='isset($log.4) && $log.4.topic_v eq 2'}<s>{/if}In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Big Air Company as of December 31, Year 8 and Year 7, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31, Year 8, in conformity with accounting principles generally accepted in the United States of America.{if condition='isset($log.4) && $log.4.topic_v eq 2'}</s>{/if}</span>
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                                <input type="radio" name="topic_t[4]" value="1" {if condition='isset($log.4) && $log.4.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'> In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Big Air Company as of December 31, Year 8 and Year 7, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31, Year 8, in conformity with accounting principles generally accepted in the United States of America.</em>" ><br/>
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                                <input type="radio" name="topic_t[4]" value="3" {if condition='isset($log.4) && $log.4.topic_v eq 3'}checked{/if} title="<em class='span'>In our opinion, because of the effects of the matters discussed in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of Big Air Company as of December 31, Year 8 and Year 7, or the results of its operations of its cash flows for each of the years in the three-year period ended December 31, Year 8.</em>" ><br/>
                                <input type="radio" name="topic_t[4]" value="4" {if condition='isset($log.4) && $log.4.topic_v eq 4'}checked{/if} title="<em class='span'>In our opinion, except for the effects of recording certain property, plant, and equipment at appraised values, as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Big Air Company as of December 31, Year 8 and Year 7, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31, Year 8, in conformity with accounting principles generally accepted in the United States of America.</em>"><br/>
                                <input type="radio" name="topic_t[4]" value="5" {if condition='isset($log.4) && $log.4.topic_v eq 5'}checked{/if} title="<em class='span'>In our opinion, except for the effect of such adjustments, if any, as might have been determined to be necessary had we been able to examine evidence regarding property, plant, and equipment, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Big Air Company as of December 31, Year 8 and Year 7, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31, Year 8, in conformity with accounting principles generally accepted in the United States of America.</em>" ><br/>
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                <span class="parent mbg {if condition='isset($log.5)'}xbg{/if}">{if condition='isset($log.5) && $log.5.topic_v eq 2'}<s>{/if}Also in our opinion, Big Air Company maintained, in all material respects, effective internal control over financial reporting as of December 31, Year 8, based on Internal Control—Integrated Framework (2013) issued by COSO.{if condition='isset($log.5) && $log.5.topic_v eq 2'}</s>{/if}</span>
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                                <input type="radio" name="topic_t[5]" value="1" {if condition='isset($log.5) && $log.5.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'> Also in our opinion, Big Air Company maintained, in all material respects, effective internal control over financial reporting as of December 31, Year 8, based on Internal Control—Integrated Framework (2013) issued by COSO.</em>" ><br/>
                                <input type="radio" name="topic_t[5]" value="2" {if condition='isset($log.5) && $log.5.topic_v eq 2'}checked{/if} title="[Delete Text]"><br/>
                                <input type="radio" name="topic_t[5]" value="3" {if condition='isset($log.5) && $log.5.topic_v eq 3'}checked{/if} title="<em class='span'>Also, in our opinion, except for the effects of the matters discussed in the preceding paragraph, Big Air Company maintained, in all material respects, effective internal control over financial reporting as of December 31, Year 8, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.</em>" ><br/>
                                <input type="radio" name="topic_t[5]" value="4" {if condition='isset($log.5) && $log.5.topic_v eq 4'}checked{/if} title="<em class='span'>Also in our opinion, because of the effect of the aforementioned material weakness on the achievement of the objectives of the control criteria, Big Air Company has not maintained effective internal control over financial reporting as of December 31, Year 8, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.</em>"><br/>
                                <input type="radio" name="topic_t[5]" value="5" {if condition='isset($log.5) && $log.5.topic_v eq 5'}checked{/if} title="<em class='span'>Since we were unable to apply other procedures to satisfy ourselves as to the effectiveness of the company's internal control over financial reporting, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion either on management's assessment or on the effectiveness of the company's internal control over financial reporting.</em>" ><br/>
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                <span class="parent mbg {if condition='isset($log.6)'}xbg{/if}">{if condition='isset($log.6) && $log.6.topic_v eq 2'}<s>{/if}Other addition or deletion to audit report.{if condition='isset($log.6) && $log.6.topic_v eq 2'}</s>{/if}</span>
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                                <input type="radio" name="topic_t[6]" value="3" {if condition='isset($log.6) && $log.6.topic_v eq 3'}checked{/if} title="<em class='span'>Delete the paragraph starting with 'Because of its inherent limitations ….'</em>" ><br/>
                                <input type="radio" name="topic_t[6]" value="3" {if condition='isset($log.6) && $log.6.topic_v eq 4'}checked{/if} title="<em class='span'>Delete the paragraph starting with 'A company's internal control over financial reporting ….' Add an explanatory paragraph describing Big Air Company's departure from GAAP.</em>" ><br/>
                                <input type="radio" name="topic_t[6]" value="4" {if condition='isset($log.6) && $log.6.topic_v eq 5'}checked{/if} title="<em class='span'>Add an explanatory paragraph defining material weakness along with a description of the material weakness related to Big Air Company's internal control over property, plant, and equipment.</em>"><br/>
                                <input type="radio" name="topic_t[6]" value="5" {if condition='isset($log.6) && $log.6.topic_v eq 6'}checked{/if} title="<em class='span'>Add an explanatory paragraph describing Big Air Company's departure from GAAP. Also, add an explanatory paragraph defining material weakness along with a description of the material weakness related to Big Air Company's internal control over property, plant, and equipment.</em>" ><br/>
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                <br>
                Audit, LLP<br>
                <br>
                Los Angeles, CA<br>
                February 26, Year 9<br>
                &nbsp;
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                    <strong>Pop-up 1:</strong><br>
                    [Correct Answer]<span style="color:#0000ff">Report of Independent Registered Public Accounting Firm</span><br>
                    <br>
                    PCAOB issuer audit reports typically use the title "Report of Independent Registered Public Accounting Firm."&nbsp; Firms that audit issuers are required to be independent and are required to register with the PCAOB.<br>
                    <br>
                    <br>
                    <strong>Pop-up 2:</strong><br>
                    [Correct Answer]<span style="color:#0000ff">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).</span><br>
                    <br>
                    Integrated audits of issuers are conducted in accordance with PCAOB standards.&nbsp; AICPA auditing standards apply to the audits of nonissuers.&nbsp;<br>
                    <br>
                    <br>
                    <strong>Pop-up 3:</strong><br>
                    [Correct Answer]<span style="color:#0000ff">A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.</span><br>
                    <br>
                    This is the required wording in the PCAOB integrated audit report.&nbsp; Financial statements are prepared in accordance with GAAP, not in accordance with PCAOB standards.&nbsp;<br>
                    <br>
                    <br>
                    <strong>Pop-up 4:</strong><br>
                    [Correct Answer]<span style="color:#0000ff">In our opinion, except for the effects of recording certain property, plant, and equipment at appraised values, as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Big Air Company as of December 31, Year 8 and Year 7, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31, Year 8, in conformity with accounting principles generally accepted in the United States of America.</span><br>
                    <br>
                    A qualified opinion is appropriate.&nbsp; The presentation of PPE at appraised value is a material misstatement, but it is not pervasive, so an adverse opinion is not appropriate.&nbsp; The auditor was able to gather sufficient appropriate evidence regarding the misstatement.<br>
                    <br>
                    <br>
                    <strong>Pop-up 5:</strong><br>
                    [Correct Answer]<span style="color:#0000ff">Also in our opinion, because of the effect of the aforementioned material weakness on the achievement of the objectives of the control criteria, Big Air Company has not maintained effective internal control over financial reporting as of December 31, Year 8, based on criteria established in <em>Internal Control&mdash;Integrated Framework</em> <em>(2013)</em> issued by COSO.</span><br>
                    <br>
                    The existence of the material misstatement of PPE that was not detected by Big Air's internal control is a material weakness.&nbsp; The existence of a material weakness results in the issuance of an adverse opinion on internal control.<br>
                    <br>
                    <br>
                    <strong>Pop-up 6:</strong><br>
                    [Correct Answer]<span style="color:#0000ff">Add an explanatory paragraph describing Big Air Company's departure from GAAP.&nbsp; Also, add an explanatory paragraph defining material weakness along with a description of the material weakness related to Big Air Company's internal control over property, plant, and equipment.</span><br>
                    <br>
                    When a qualified opinion is issued due to material misstatement of the financial statements, an explanatory paragraph must be added to the auditor's report that describes the departure from GAAP.&nbsp; When an adverse opinion is issued on internal control, an explanatory paragraph must be added that defines and describes the material weakness.<br>
                    &nbsp;

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